TERRAFORMING TERRA
We discuss and comment on the role agriculture will play in the containment of the CO2 problem and address protocols for terraforming the planet Earth.
A model farm template is imagined as the central methodology. A broad range of timely science news and other topics of interest are commented on.

Saturday, May 28, 2016

Is Uber the Real Monopoly?

Hardly of course. In fact the emergence of Uber is the direct result of monopoly practices exercised for almost as long as we have had the automobile and likely the hackney long before all that. The mere fact that taxi licenses became so valuable tells you that such practises are in force. We have the same thing here in terms of milk quotas as well.

What happens though is such regulatory licenses are often rationally justified by extant conditions, not least been predatory dumping and capital concentration, long before anyone worries about the toilers actually making a fair living. I have seen a well paid janitorial industry thrust aside by immigrant family owned operators in which lower real wages are accepted in order to bid in jobs while making a mockery of minimum wages.

The more serious problem with all regulatory monopolies happens to be that they are difficult to revisit and rethink once established. Thus the best solution is a disruptive technology that eliminates the monopoly. This happens to be the Uber solution. It is also working. Soon enough we will have driver less cars picking up fares as well...

All such systems are thus vulnerable as well. Imagine driver less cars delivering fresh raw milk inside of six hours from milking and pressure pasteurized at the barn at a superior price point?

Nearly everyone I know who uses Uber is, like me, mightily impressed by this transportation service. It makes transportation within urban and suburban areas far less pricey and far more convenient than it was in the pre-Uber-era dominated by government-regulated taxicabs. Uber is a boon to consumers and to people who work as drivers.

Uber is a shining example of creative destruction — in particular, in this case destroying not only an older, established way of serving consumers but, more importantly, destroying the government-granted monopoly privileges that that older, established way enjoyed.

Douglas Rushkoff, however, is unimpressed with Uber. In his new book, Throwing Rocks at the Google Bus, Rushkoff alleges that the true monopolist is Uber, the success of which “involves destroying the dozens or hundreds of independent taxi companies in the markets it serves” [p. 86]. It is significant that in this book Rushkoff never mentions the entry restrictions and other government-granted privileges that protect traditional taxicab owners from competition.

So what evidence does Rushkoff present for this counterintuitive (to say the least) proposition that Uber, by using new technology to destroy a long-entrenched monopoly, is itself a lamentable, monopolizing development? None — at least no evidence that any economist would regard as relevant or as supporting Rushkoff’s proposition.

Rushkoff dislikes Uber because it is aggressive (and because it doesn’t promote as much personal connection as he’d like between drivers and passengers [!]). He hypothesizes — or, rather, asserts — that Uber somehow must monopolize all taxi service for it to succeed. Rushkoff’s economic theory for this alleged requirement for complete domination by Uber is vague. Here it is (pages 86-87; original emphasis):

Creative destruction? Perhaps — but with a twist: the new businesses of the digital era aren’t stand-alone companies like stores or manufacturers but, as they say, entire platforms. This makes them capable of reconfiguring their whole sectors almost overnight. They aren’t just the operators — they are the environment.

To become an entire environment, however, a platform must win a rather complete monopoly for its sector. Uber can’t leverage anything if it’s just one of several competing ride-sharing apps. That’s why the company must behave so aggressively.

The best that I can make of this word salad is that Rushkoff assumes that a ride-sharing app has all the properties of a natural monopoly — that is, as its customer base expands its cost of serving each customer falls, and that this relationship between expanding customer base and falling costs continues to hold until all customers are served by one company.

Overlook problems with the very notion of natural monopoly. What reason is there to believe that the cost of supplying ride-sharing services with apps, as Uber (and Lyft) do, is minimized when only a single such service serves the entire market? I can think of none.

More importantly (because my imagination, being limited, hardly supplies a definitive test), Rushkoff offers no such reason. He merely asserts it. Rushkoff’s assertion, in turn, springs from an illogical inference that he draws from Uber’s aggressive effort to expand its ridership. He infers that, because Uber is aggressive, not only is Uber intent on “becom[ing] our delivery service, errand runner, and default app for every other transportation-related function” [p. 87], but also that Uber is destined to succeed in this quest unless and until the rules of the traditional free-marketplace are rewritten.

But of course any company worth the weight of its corporate charter wants as large a market share as it can possibly achieve and will act aggressively in pursuit of that as-large-as-possible market share. That’s what competition is supposed to incite firms to do! It doesn’t follow, though, that this widespread desire and attendant action result in genuine monopoly power. As long as competition is channeled toward pleasing consumers rather than toward pleasing politicians, genuine monopoly power is practically impossible. (Good luck finding a single historical example of consumer-harming monopoly power that is not rooted in government grants of special privileges to incumbent producers.)

Again, Rushkoff is characteristically unclear here. I infer from his word salad that he has in mind some problem akin to natural monopoly, but that inference might well be mistaken.

How ironic that one of the most successful monopoly-destroyers of recent years — Uber — is demonized by Douglas Rushkoff as introducing monopolization into the market that this company has, in fact, made genuinely competitive for the first time in decades. How ironic that a supposed enemy of The Man — an energetic crusader for economic "justice" — a visionary theorist of the future — laments the destruction of the decades-old cronyism of taxicab monopolies as he peddles baseless myths about the technology and the company that has done the most to finally put an end to this cronyism.

No comments:

About Me

Apr 2017 - 4.1 Mil Pg Views, March 2013 - Posted my paper introducing CLOUD COSMOLOGY & NEUTRAL NEUTRINO rigorously described as the SPACE TIME PENDULUM, September 2010 I am pleased to report that my essay titled A NEW METRIC WITH APPLICATIONS TO PHYSICS AND SOLVING CERTAIN HIGHER ORDERED DIFFERENTIAL EQUATIONS' has been published in Physics Essays(AIP) and appeared in their June 2010 quarterly. 40 years ago I took an honors degree in applied mathematics from the University of Waterloo. My interest was Relativity and my last year there saw me complete a 900 level course under Hanno Rund on his work in relativity,as well as differential geometry(pure math) and of course analysis. I continued researching new ideas and knowledge since that time and I have prepared a book for publication titled Paradigms Shift&. I maintain my blog as a day book and research tool to retain data and record impressions and interpretations on material read. Do join my blog and receive Four items of interest daily Monday through Saturday.